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Friday, March 24, 2023

MTN Nigeria is a Must Own Stock Now

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An investor who has not yet bought MTN Nigeria’s stock should better do so now because the telecommunication giant is gradually becoming a growth stock that generates substantial and sustainable positive cash flows.

Of course, its earnings are expected to increase at a faster rate than an average company within the same industry. And that is predicated on the country’s robust and youthful population, rising smartphone penetration, and the acceleration of 4G, and the recent test of 5 G.

Little wonder investment house Chapel Hill Denham have upgraded their 12-month target price for MTNN to N230 from N180 previously and maintained their “BUY” recommendation on the stock, implying an upside of 46.10 percent.

As the World Bank expects the country’s population to increase to around 400 million by 2050, the earnings of the telecoms company will surge as data usage will definitely accelerate since a lot of young people are increasingly becoming addicted to their smartphone that they use to swoop on social media.

Magnifying data usage and the dominance of financial technology (FINTECH) are going to add the desired impetus to MTN Nigeria’s earnings over the next 3 years.

Indeed, the telecom giants are cannibalizing the revenue of banks, and MTN Nigeria is already having a share of the fees and commission income.

MTNN generated fintech revenue of N21.29 billion in 2017, which is similar to the fee & commission income of N21.63bn generated by FCMB the same year, but the narrative changed just after three years.

Based on Chapel hill Denham banking sector coverage, the telecoms giant’s fintech revenue will be above the fee & commission income of any Nigerian bank by 2025 (FY-25E.).

“According to management, MTN N is open to strategic partnership/acquisition that will lift its game in the fintech space. Thus, inorganic growth is on the cards for the fintech business, in our view,” said analysts at Chapel Hill Denham.

The telecoms giant will generate Fintech revenue- which is equivalent to fees and commission income- of N468 billion by 2025, according to research house Chapel Hill Denham.

That compares to United Bank for Africa’s (N237 billion); Access Bank, (N194 billion); Zenith Bank, (N160 billion); FirstBank Nigeria, (N136 billion); Stanbic IBTC, (N105 billion); Guaranty Trust Bank, (N73 billion); FCMB, (N45 billion), and N35 billion.

A surge in earnings will give MTN Nigeria the impetus to increase dividend payment to shareholders, and that is supposed to trigger stock rally as more investors will swoop on the shares.

Its total revenue was up 24.0 percent to N791.26 billion from N638.07 billion the previous year.

Its service revenue grew by 24.1 percent year on year (YoY), driven by the sustained growth in data and also partly due to the lower base in comparative 2020 voice revenue that resulted from lockdowns during that period.

Voice revenue grew by 13.1 percent, benefitting from an 11.8% increase in traffic and our customer value management (CVM) initiatives. The impact on voice revenue from the industry-wide suspension of new SIM registration was partly offset by higher usage in our active SIM base as well as migration to a higher quality of experience.

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